To sum it all up, Trump borrowed his way into apparent wealth. 1929 seems eerily familiar.
From 1928 thru 1929, USA’s Gross National Product hovered around $104 Billion U.S. Dollars. By 1931, it had fallen to less than $60 Billion, a decline of over 57%. Because the US already played a massive role as a trading partner and investor across this flat earth, Wall Street’s self-destruction caused damages, losses, structural harm and massive unemployment in every nation. Across the USA, 1933 unemployment rates averaged 25% of formerly employed individuals. In Germany, Canada, UK, and much of Africa, those rates reached to over 30%.
In 1933, China was still trying to recover from the ill effects of WWI, the Chinese Civil War, and the adverse impact of Japanese invasions and occupations. Its economic research and data were neither reliable, nor accurate. By multiple accounts and reports, inflation was huge, unemployment extremely high and food and material resources were scarce.
Japan faced similar, horrific economic issues, however, there was no national record keeping or scholarly, economic based studies. Anecdotal evidence was quite similar to China’s and suggested similar economic devastation.
Just a few years earlier, in 1928 and 1929, the US economy was booming, stock markets was skyrocketing, skirts were growing shorter, flappers were flapping, and Margin Trading became a national sport. Margin trading often reached 90%, as the lure of free money and a constantly growing stock market became irresistible to laypersons and so-called financial experts.
To slightly digress, in 2022, the estimated GDP in the USA was $24.7 TRILLION, more than 230 times as large as it was in 1929.
GDP estimates are always touchy and iffy. New technologies, wars, and methods of measurement have to be taken into account. For example, if we based personal income data 150 yrs ago on one particular field, and tried to compare or measure it to a similar field’s income rates in modern times, we would have pure nonsense.
Take the dangerous jobs of streetlight lighters back then. Faulty equipment, bad piping and worse installation, not to mention alcohol abuse, led to many deaths and massive property damage. Yet still people preferred to have their streets lit at night.
Thanks to Edison, Westinghouse, Tesla and other great men of their time, the gas-lighting industry was effectively made redundant (except in modern political blogs).
Comparing lamplighters’ trade union pay rates back in its day is almost worthless in a direct comparison with today’s wage rates. Their industry and union power no longer exist.
Another factor to consider is that the 1929 economy was hyperventilating. It was inflated, to a very great degree, by speculation, questionable accounting ideas and a total lack of regulations and safety nets. (Remember that, you moronic pure free-traders!)
Margin trading played a significant role in creating the boom times of 1929. It allowed an individual the opportunity to invest $10 dollars in a stock purchase, while borrowing 10X that amount. It seemed to be free money, spending $10, while buying $100 dollars worth of shares.
When a particular stock rose, and you sold high, you not only got your $10 investment back, but often could pay back your entire loan, and still net a significant profit.
Let’s say you bought $100 of stock, with a 10% personal investment by you and the rest bought “on margin.” If the stock doubled, your stock would now be worth $200. If you sell it all, and pay back the loan of $90, you still have $110, less your $10 original investment. It was MAGIC!
Kinda like today’s bitcoin.
In most of 1929, stock values were rising, even doubling and tripling in short time periods. Outsiders looking in wanted to get in this game, and invested their own moneys, also on margin.
Buying stuff on margin is great when you have a bullish market. But, bulls often transform into bears, often for little or no reason. As a result, markets would eventually drop, often by a lot. Speculation-based margin trading allowed investors to buy more stocks than they could afford outright. This fueled even more speculation, as investors were essentially betting on the prices of stocks to rise. As more investors joined in the fun of margin trading, the stock market became inflated beyond its intrinsic value, creating a speculative bubble.
In 1929, most stock valuations were not based in reality, just greed and wishful thinking. Their incredible rise was not based on actual sales, market share, profits, losses, costs, return on investment or inflation. When prices began to drop, your $200 (purchased on margin for $100) stock could be worth $50 or less. But, you only put in $10 personally, and borrowed the additional $90. Now that your entire stock holding (50) is worth less than your loan (90), let’s just agree that you are fucked.
The companies making those trading loans would start calling in their loaned money and any trader using Margin trading, would owe the entire $90. These forced sales were called Margin Calls, and led to a lot of bankers/investors to try to master the sport of flying with out wings, mainly out of their high-rise office buildings.
Strictly put, margin trading involves buying stocks with borrowed money, using the purchased stocks as collateral. Investors could purchase stocks with only a fraction of the total cost, with the remainder borrowed from their broker.
Stock price increasing could be contagious. Rising prices caused other investors to join in. Again, on margin.
But stock prices also go down. When stock prices began to decline in late October 1929, investors who had purchased stocks on margin faced Margin Calls from their brokers. A margin call occurs when the value of the securities used as collateral falls below a certain level, requiring the investor to deposit additional funds to cover the shortfall. If investors couldn't meet margin calls, brokers could sell off their holdings to cover the losses, further driving down stock prices.
The need to pay off the Margin Calls effectively forced the sales of many other stocks and investments, leading to even lower prices across the market, and , thereafter, to even more margin calls. This triggered a cascade of selling.
This panic selling led to a rapid and severe decline in stock prices, culminating in the stock market crash of October 29, 1929, known today as Black Tuesday. In a number of weeks, the Panic wiped out billions of dollars in wealth and shattered investor confidence.
Black Tuesday also triggered a wave of bank failures, as banks assets were invested in the stock market and/or gave loans to investors who were unable to repay them.
The collapse of the banking system led to a severe contraction in credit, which in turn deepened the economic downturn. Widespread unemployment, business closures, and a sharp decline in consumer spending followed, marking the onset of the Great Depression.
Trump and leveraged property investments
Every single real estate holding of Donald Trump is heavily leveraged. All too often, he sold his name for public use, without having significant shares of ownership. In many cases, he may have had no interest at all.
Real estate markets are always subject to fluctuations due to various factors such as economic conditions, changes in demand, and interest rate movements. One modern example is the current SanFran real estate business market, with its many empty buildings.
Highly leveraged real estate investments are more vulnerable to market downturns. If property values decline significantly, owners may find themselves underwater, owing more on the properties than they are worth.
Where Trump did have an actual financial interest in some property, the property in question would be heavily mortgaged, or otherwise in serious debt.
Servicing debt typically requires regular interest payments.
If the income generated by the properties is insufficient to cover these payments, the owner may need to inject personal funds or refinance the debt. In a scenario where interest rates rise or rental income decreases, the burden of interest payments can become overwhelming, potentially leading to default.
Because of his already heavily leveraged holdings, US banks began to shun loaning him any additional sums more than a decade ago.
The sole exception was Deutsche Bank. This German bank has been accused over a decade of money-laundering and having secret ties to Moscow. This bank also loaned about $2.5 billion to Trump projects over the past two decades.
Even after he defaulted on a $640 million obligation, it continued to loan him money, often totaling nine figures.
After his default, Trump sued Deutsche, blaming it for his failure to pay back his massive debt. But replacing bad old debt with bad new debt is not a game that can be played for long, not even if drugs and arms and organized crime investors provided so much money to Deutsche over the same period.
Another mostly ignored part story about his property holdings is just how often local mobsters invested in his New York real estate to ‘clean up” the questionable source of their money.
Moscow also overpaid for Trump properties routinely, making Trump the go-to guy to clean up/hide the source of many, many millions. Millions were paid, far in excess of the market rate, while the actual condos and business offices were empty and unused.
Then we come to Truth Social, his version of Twitter. Jay Ritter, a finance professor at the University of Florida, recently wrote,
“Trump Media’s management warned last year that the company was at risk of insolvency without a merger, and most analysts are skeptical of its current valuation above $6 billion.”
Ritter strongly indicated that he was less than impressed with its income, which compared unfavorably to the total, not net, sales of any local MacDonald’s franchise.
Clearly not an income stream that would be valued in this billions.
"It’s grossly overvalued. It qualifies as a meme stock for which the price is divorced from fundamental value,” Ritter further explained.
The recent collapse of Truth Social’s valuation, and the result hundreds of millions of gains by “short-sellers” was not just predictable, but expected. Its share value continues to fall and may effectively reach -0- by the next quarter. The rubes still investing in Truth Social, are mainly Trump supporters who are convinced their retirement funds mean more to Don than to their families.
Forbes defines “short-selling” as:
Short selling is an advanced trading strategy that flips the conventional idea of investing on its head. Most stock market investing is known as “going long”—or buying a stock to sell it later at a higher price. If traders short a stock, they are “going short,” or betting that the stock’s price will decline.
To short a stock, a trader initiates a position by first borrowing shares from a broker before immediately selling that position in the market to other buyers.
To close out the trade, the short seller must buy the shares back—ideally at a lower price—to repay the loaned amount to the broker. If the stock’s price fell, as the trader expected, then the trader nets the price difference minus fees and interest as profit.
It is stunning (?) that the only ones profiting from Truth Social are the short-sellers. But, I am almost, but not quite, embarrassed by the amount of glee I feel as a result of that.
The bottom line is that He is a fraud, a grifter, a cheat, a liar and a thief.